We take a look at the records of some long-serving top dogs.
Reed Elsevier's (LSE: REL) chief, Ian Smith, has quit after little more than eight months, causing the share price to plunge 5.7% this morning whilst the FTSE 100 is up 1%. Maybe investors shouldn't have been surprised, because Smith had held the top job at no less than three other companies since 2002.
A change at the top may cause dramatic price movements, but it's not just the day of change that we need to be thinking about. We should also consider how one person can make a difference to the long-term performance. Imagine how schizophrenic your employer would be if the head kept changing. Each new boss has different ideas and methods. Just think how differently you'd run things if you were boss. (If I were my editor, for example, I'd pay the writers more money, nudge nudge hint..!) Everyone wants to run things differently and it takes time for plans to take effect.
Consider Admiral (LSE: ADM), the insurer, which, under Henry Engelhardt's leadership, has grown every single year since it began selling policies in 1993, increasing revenue from £18m to £910m last year, and growing customer numbers from 50,000 to 1.8m.
Michael Lynch was also in on the ground floor of Autonomy (LSE: AU), the software development and services company. He co-founded it in 1996 and has forever been both the MD and CEO. Despite the size it's grown to, it's still delivering a profit margin around 30%. Virtually the only losers ever to have bought this stock are the ones who bought at crazy prices during the tech boom, but you can't blame that on the leadership.
Michael Spencer founded ICAP (LSE: IAP) in 1986 and, when it merged with Exco in 1998 he headed the enlarged group as the big boss, and still does. It's grown both organically and through a series of mergers and acquisitions, and Spencer's kept his money where his mouth is, owning around 20% of the company.
Simon Wolfson has been a Next (LSE: NXT) director since 1993 and became chief in 2001. Since then, Next's share price is up 150% versus a small fall for the FTSE 100 over the same period. Next even continued to improve its profits during last year (and we don't need wine tasters to tell us it was a terrible year, on the whole) whilst reducing its debts.
Bart Becht has been in charge of the household and healthcare products group Reckitt Benckisser (LSE: RB) since the end of 1999 and has steered its growth with its share price matching it, now up five-fold whilst the FTSE 100 is down over the period.
Sir Bill Gammell has been head of Cairn Energy (LSE: CNE), the oil and gas exploration and production company since its listing in 1988. Its (or his?) performance has been staggering, with the share price up 20-fold in the past ten years alone.
Serco (LSE: SRP) works to improve services in every sector imaginable. Christopher Hyman has been CEO since 2002 and the share price has spent the majority of the time since then out of breath from climbing upwards.
5-year performance
| Company | 5-year performance |
|---|
| Admiral | +252% |
| Autonomy | +820% |
| Cairn Energy | +93% |
| ICAP | +69% |
| Next | +16% |
| Reckitt Benckisser | +98% |
| Serco | +139.5% |
| FTSE 100 | +12% |
So we can always rely on these bosses, can we?
Just remember, Sir Fred Goodwin was, till recently, the long-term boss of what was an excellent long-term performer, Royal Bank of Scotland. How things can change.
